Federal Reserve studies stablecoin inclusion in M1 and M2 monetary aggregates

Federal Reserve researchers are examining how to incorporate stablecoins into U.S. monetary aggregates, such as M1 and M2, while warning of potential double-counting issues. In an independent research note titled ‘New Forms of Money and the U.S. Monetary Aggregates’, researchers Kristen Payne and Mary-Frances Styczynski proposed an analytical framework for treating tokenized deposits, tokenized money market funds, and payment stablecoins as new monetary assets.

A primary concern is that the reserve assets backing stablecoins—such as bank deposits, government money market funds, and U.S. Treasuries—may already be counted within existing M1 or M2 metrics. If the circulating supply of the stablecoin is added to these existing figures without adjustment, the same dollar could be counted twice. The researchers noted that the extent of this overlap depends on the specific composition of an issuer's reserves.

The study suggests that the classification of stablecoins should depend on their primary economic use. If used widely for daily payments, they might align with M1; if used primarily for value storage or crypto transactions, they may better fit M2. Additionally, the researchers highlighted the need for better data to distinguish between domestic and international circulation, as blockchain-based assets often cross borders, making it difficult to determine how much should be reflected in U.S. monetary statistics.